Harris Corp Earnings: Higher Expenses Shrinks Margins

S&P 500 (NYSE:SPY) component Harris Corporation (NYSE:HRS) swung to a loss in the third quarter, missing analysts’ forecast. Harris Corporation is an international communications and information technology company serving commercial markets and government.

Results: Reported a loss of $353.2 million ($3.15 per diluted share) in the quarter. Harris Corporation had a net income of $139.5 million or $1.09 per share in the year-earlier quarter.

Revenue: Rose 4.4% to $1.48 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Harris Corporation fell short of the mean analyst estimate of $1.34 per share. Analysts were expecting revenue of $1.47 billion.

Quoting Management: “Orders, revenue, and non-GAAP earnings per share from continuing operations were all higher compared to the prior year,” said William M. Brown, president and chief executive officer. “The company continues to generate strong cash flow, and as a result, in the third quarter we increased the dividend by 18 percent and the target payout ratio from 20 to 25 percent.”

Key Stats:

Gross margin shrank 0.1 percentage point to 36.5%. The contraction appeared to be driven by increased costs, which rose 4.6% from the year earlier quarter while revenue rose 4.4%.

Revenue has risen for the last four quarters. Revenue increased 0.5% to $1.45 billion in the second quarter. The figure rose 3.9% in the first quarter from the year earlier and climbed 14.5% in the fourth quarter of the last fiscal year from the year-ago quarter.

After beating analyst estimates for the two previous quarters, the company fell short of forecasts. In the second quarter, it topped the mark by 4 cents, and in the first quarter, it was ahead by one cent.

The company’s loss in the latest quarter follows profits in the previous three quarters. The company reported a profit of $133.1 million in the second quarter, a profit of $121.6 million in the first quarter and $133.5 million in the fourth of the last fiscal year.

Looking Forward: Next quarter’s results are expected to be more favorable for the company. Over the past sixty days, the average estimate for the fourth quarter has reached $1.53 per share, up from $1.51. For the fiscal year, the average estimate has moved up from $5.11 a share to $5.14 over the last ninety days.